As ecommerce and international business continues to grow, so do global payments. For those involved in this sector, this means more regions to deal with, a wider variety of regulations and sanctions and an ever-changing array of risks to be aware of. Particularly with regular revisions, regulations and sanctions can present many complications to keep on top of when making cross-border transactions and can create a minefield for businesses trading internationally.
However, as with all change, and particularly in relation to regulation and compliance, varying conditions present opportunity for innovation. This has enabled non-bank payment providers to use technology and flexibility to fill gaps in the B2B cross-border market using fast, efficient and transparent payment methods. These alternative providers have opened access to a wide range of payment routes providing significant savings to businesses, and even banks.
In our globally connected world, businesses often need to send money to countries that lack payment security protocol or regulatory framework, requiring the payment provider to work closely with the local bank to advise on expected standards, or take the additional de-risking steps onboard themselves. Despite this, there are still concerns around robust compliance and whether new providers can really offer bank-grade standards, in spite of several being granted banking licenses in the UK and Europe, and stats regarding fines for failure to comply with regulation heavily weighted against traditional banks*.
For an industry in the middle of ongoing disruption, collaboration offers the best of both worlds. The reliability and trust of traditional banks, with the technology and flexibility that a FinTech can provide, has benefits to both, end customer and a business’s bottom line.
To be considered a reliable partner, businesses providing payments should be offering features such as real-time transaction screening and comprehensive monitoring tools to quickly identify suspicious behaviour and patterns of the direct customer or their recipients. Payment providers should also have comprehensive risk models tailored to the needs of their partners and customers, providing rigorous and ongoing internal training around the model and potential risks. Deep insight into the risks associated with each route, and available solutions in place to mitigate related risks are also of vital importance. The cumulation of these factors enable providers to maintain highly regarded compliance structures and offer a trustworthy business proposition.
At Earthport, a single API connection is able to relay the local requirements of the beneficiary bank across 88 countries, ensuring payments don’t fail due to missing compulsory information, resulting in settlement rates of 99.8%, globally. Furthermore, customers can easily track the status of their payments in real-time using their VAN (virtual account number), offering transparency of where the payment is at any stage, and with average global delivery speeds of T+1, payments reach beneficiaries fast, and at a lower cost than correspondent banking. The grouping of these elements, combined with our bank-grade compliance, means Earthport customers can rest assured that their money and reputation is always safe.
Understanding local and global risk is a critical job, and collaboration between traditional banks and agile FinTech businesses can assist with this huge task, using technology and shared expertise. FinTechs must also ensure their due diligence is tailored, specific to the customer they are working with to encourage a deep understanding of the compliance culture within that business and foster a close working relationship.
*McKinsey – The Future of Cross-Border payments, 2018